[2016] IEHC 103
THE HIGH COURT
COMMERCIAL
[2014 No. 10087 P]
BETWEEN
CARLO TASSARA ASSETS MANAGEMENT S.A.
PLAINTIFF
AND
ÉIRE COMPOSITES TEORANTA, WILLIAM COSTELLO, PATRICK FEERICK, CONCHUR Ó BRÁDAIGH AND TOMAS FLANAGAN
DEFENDANTS
JUDGMENT of Mr. Justice R. Haughton delivered on the 26th day of February, 2016.
1. In these proceedings, which are listed for hearing in early April, the plaintiff has applied by motions directed against the first named defendant (“the company”, and the only defendant to be represented by solicitors and counsel), the second to fourth named defendants, and the fifth named defendant for further and better discovery, and to determine questions of privilege. A cross application for further discovery was brought by the company against the plaintiff. All of these applications had been dealt with by orders of this court made on 19th February, 2016, save in one respect.
2. An issue arose in relation to the claim of legal professional privilege by the company over certain documents described in the Second Part of the affidavit of discovery of Mr. Kevin McPartlan sworn on 23rd September, 2015, on behalf of the company. Similar privilege is sought in the affidavit of Mr. Patrick Ferrick sworn on 23rd September, 2015, on behalf of the second, third and fourth named defendants. Insofar as the documents directly concern the fifth named defendant, he also seeks privilege over same. The second to fifth named defendants who were present in court relied on the arguments in favour of privilege advanced by and on behalf of the company.
3. In determining the issues of privilege that arise the court has had regard to the affidavits sworn by Mr. Claude le Monnier on 18th December, 2015 and 2nd February, 2016, on behalf of the plaintiff, and affidavits sworn by Mr. Kevin McPartlan on 19th January, 2016, on behalf of the company, and by Mr. Patrick Ferrick dated 25th January, 2016, on behalf of the second to fourth named defendants, and a replying affidavit of Mr. Tomas Flanagan sworn on 25th January, 2016, the exhibits referred to in those affidavits. The court has also had the benefit of written legal submissions from the plaintiff and the company, which were supplemented by the oral submissions of senior counsel. Having heard submissions, I determined that it was necessary and appropriate for the court to inspect the documents over which privilege was claimed. Certain documents were duly furnished to the court. These differ somewhat from those identified as being in dispute by reference to the descriptions in the relevant part of the affidavit of discovery sworn on behalf of the company. I will make some general observations with regard to privilege before addressing the particular documents furnished. This may also be of assistance to the parties in the context of the further and better discovery that has been ordered.
Background
4. The background to these proceedings is that in 2007, Carlo Tassara SpA lent €2 million to the company by way of a Loan Note, the terms of which were governed by a written agreement dated 17th December, 2007. At the same time, Carlo Tassara SpA invested €3.3 million in the company for 74,830 ordinary shares, and it entered into a written Shareholders Agreement dated 16th January, 2007.
5. The claim in these plenary proceedings for declarations related to the Loan Note and other reliefs is based on pleas that in November, 2008 the Loan Note was assigned to the plaintiff and the plaintiff became a shareholder in the company. The validity and effect of this assignment is disputed by the defendants who also assert that there was no entitlement to assign the Loan Note to any person other than to an “affiliate”. It is also asserted that the purported transfer of shares in the company to the plaintiff is invalid, and that the plaintiff has never become or been validly registered as a shareholder, and that its nominee director Mr. Le Monnier never became a director of the company. The plaintiff joins issue, and maintains that the defendants are estopped from challenging the validity of such matters.
6. The Loan Note provides that if there is default the “Holder” of the Note may “in the Holder’s sole discretion, be converted into ordinary shares”. There is then a provision in the 2007 Shareholder’s Agreement as follows:-
“8.3.1 If it is proposed by one or more of the Shareholders (excluding any of their successes or assigns) to transfer all of the Shares as part of a bona fide arms length transaction and where those Shareholders together hold a minimum of 50% of the issues share capital in the Company, those Shareholders (the Selling Shareholders) shall have the option (the Drag Long Option) to acquire all the other Holders of Shares to transfer all of their Shares as beneficial owners on the same terms and conditions (including price and payment terms) to any party wishing to take a transfer of such Shares (the Third Party Purchaser) or as the Third Party Purchaser shall direct in accordance with this Clause 8.3.”
7. The defendants assert that on 21st December, 2013, at a meeting of directors which was attended by the plaintiff’s representative/director, and/or pursuant to an offer of the fifth named defendant made on 24th December, 2013, it was agreed that the Loan Note would be converted into ordinary shares, and that the fifth named defendant would invest in the first named defendant and would become sole shareholder. The plaintiff denies that agreement and challenges the lawfulness of the purported conversion of the Loan Note in 2014. By letter dated 12th May, 2014, Mr. Brian O’Callaghan, solicitor, acting on behalf of the company wrote to the plaintiff (the letter was also sent to Carlo Tassara SpA) purporting to confirm the agreement to convert the Loan Note, and advising that “the net result of this agreed conversion is that Carlo Tassara Asset Management is a 47% shareholder in the company”. That letter indicated that the company was implementing the terms of the “agreed” investment scheme involving the fifth named defendant, and in the letter indicated that the company would:-
“reserve its position regarding the possible issuing of proceedings against you both and/or each of you to recover any losses sustained by the Company resulting your aforesaid conduct”.
8. Subsequently, the company on the proposal of the other shareholders who held in excess of 50% of the issued share capital of the company, purported to exercise the Drag Along Option to acquire inter alia the plaintiff’s 47% shareholding and transfer 100% of the shares in the company to the fifth named defendant. The plaintiff in these proceedings challenges the validity of the purported Loan Note conversion and the purported exercise of the Drag Along Option which appears to have taken place at some date - not precisely identified - between 22nd August, 2014 and 3rd September, 2014.
9. The plenary summons issued on 28th November, 2014. However, on behalf of the company it is contended that litigation was in contemplation as early as February, 2014, and that this is evident from a letter dated 12th May, 2014 sent by solicitor Mr. O’Callaghan’s on the company’s behalf to the plaintiff, and the response dated 23rd May, 2014 from solicitors acting for the plaintiff.
10. In his replying affidavit sworn on 19th January, 2016 Mr. McPartlan provides some detail as to when various steps were (purportedly) taken by the company. He states:-
“29. …By 5th May 2014, however, it was clear that the Plaintiff was not engaging in any efforts to save the Company. In light of this, the Directors decided to proceed with the conversion of all Shareholder loans (including their own loans and those of the Plaintiff)……Ultimately by letter dated 12th May 2014 the Company solicitor wrote to the Plaintiff setting out the position and their continued failure to comply with their previous agreement.”
In para. 30 he avers that this resulted in the plaintiff owning 47% of the company; that by letter of 19th May, 2014 the company formally informed the plaintiff of the fifth named defendant’s offer to purchase all the shares in the company for €50,000 and then immediately invest €250,000 in the company; and that if the plaintiff did not make a counter proposal within seven days the Drag Along provision could be used by the majority shareholders to compel the plaintiff to sell its shares to the fifth named defendant.
Thereafter, but on a date that is uncertain, the Drag Along Option was exercised by the majority shareholders, and in para. 30 of the company’s Defence it is pleaded that by Notice dated 1st August, 2014 Mr. Le Monnier was informed of this.
In Replies to Particulars provided by the fifth named defendant he pleads that he was offered 100% of the shares in the company for €50,000 by offer in writing on 22nd May, 2014; that he agree to purchase 100% of the shares in the company on 13th June, 2014; and that the “Drag along issued on 01-August 2014”. It appears that the purported sale to the fifth named defendant was completed in early September, 2014.
The Privilege Sought
11. Two categories of discovery are relevant:-
Four listed documents were identified from the company’s affidavit of discovery as being in dispute, and these are described in that affidavit as follows (I have numbered them for convenience):-
Table A
| Courts number | Description of Document | Date | Sent By | Sent To |
| 1 | Email | 01-May-14 | Brian O’Callaghan | Kevin McPartlan |
| 2 | Email | 14-May-14 | Brian O’Callaghan | Kevin McPartlan |
| 3 | Email | 01-Sep-14 | Kevin McPartlan | Brian O’Callaghan |
| 4 | Email | 02-Sep-14 | Brian O’Callaghan | Kevin McPartlan |
I do not appear to have been furnished with document no. 1.
Also relevant is Category A.5:-
“5. All documentation evidencing or touching upon discussions relating to the sale of the Shares (including the completion thereof) in the First Named Defendant to the Fifth Named Defendant. To include but not limited to all documentation evidencing or touching upon the offers made to buy the Plaintiff’s Shares in the First Named Defendant and the alleged offers for the Plaintiff to buy the entire Shareholding in the First Named Defendant.”
Four listed documents are said to be in dispute:-
Table B
| Courts number | Description of Document | Date | Sent By | Sent To |
| 5 | Email | 22-Jan-15 | Kevin McPartlan | Tomas Flanagan |
| 6 | Email | 25-Jan-15 | Kevin McPartlan | Tomas Flanagan |
| 7 | Email | 05-Feb-14 | Kevin McPartlan | Brian O’Callaghan |
| 8 | Email | 20-May-14 | Kevin McPartlan | Brian O’Callaghan |
I do not appear to have been furnished with document no. 6.
12. The claim for privilege in the affidavit of discovery sworn by Mr. McPartlan merely states that “I say that the said documents are privileged”. The same wording is adopted by Mr. Ferrick in his affidavit of discovery sworn on behalf of the second to fourth named defendants and by the fifth named defendant in his affidavit of discovery. This, of course, is inadequate because it does not specify the basis upon which privilege is claimed, and it may also be commented that the description of the documents in the Schedule is inadequate for the plaintiff to assess the claim to privilege. However, the claim to privilege was elaborated in the affidavits exchanged in respect of the motions, and in the legal submissions. At para. 5 of his affidavit sworn on 19th January, 2016 Mr. McPartlan states:-
“This privilege relates to Legal Professional Privilege attaching to documents referable to legal advice requested and obtained and/or discussed between the First Named Defendant and its legal advisors in the context or contemplation of this litigation.”
I should note in passing that the affidavits to be sworn in relation to further and better discovery should adequately describe the documents and specify with some particularity the basis for privilege that may be claimed.
13. The defendants appear to claim both “legal advice privilege” and “litigation privilege” in respect of this documentation. They assert that litigation was apprehended from February, 2014 onwards, even though the proceedings were not commenced until 28th November, 2014. They assert that the documents in question consisted of communications between clients and lawyer or lawyer and client, and arose out of the professional lawyer/client relationship, and that they were confidential in nature, and came into being for the purpose of giving or receiving legal advice. It is claimed that these communications all involved Mr. Brian O’Callaghan, who was then acting as a solicitor for the first named defendant. Mr. Kevin McPartlan was at all material times the General Manager of the first defendant, and Mr. Patrick Ferrick was the Managing Director. It is asserted that the dominant purpose of each of the documents was to prepare for reasonably apprehended litigation. Insofar as the documents over which privilege is sought post date the issues of proceedings it is claimed that their dominant purpose related to the conduct of those proceedings.
14. The plaintiff challenges the privilege claimed on the following grounds:-
a. That the plaintiff as a shareholder of the company is entitled to discover legal advice received by the company during the period in which the plaintiff remained a registered shareholder.
b. That the company claims privilege over documents that are clearly not privileged.
c. That the company cannot claim litigation privilege arising prior to the letter from Mr. O’Callaghan of 12th May, 2014.
The plaintiff asserts that the plaintiff’s shares in the company were not transferred to the fifth named defendant until at the earliest 3rd September, 2014 or some date after that, and that up to that time the plaintiff remained a shareholder of the company.
15. In the absence of a clear cut Irish caselaw on point counsel for the plaintiff relied on CAS (Nominees) Ltd. and others v. Nottingham Forest Plc. and others [2001] 1 All ER 954. CAS was a minority shareholder in the holding company of a subsidiary which owned Nottingham Forest Football Club (“the Club”). The Club needed an urgent injection of funds and new investment was secured by an agreement with the Respondent to invest £6 million pounds for 29% of the shares in the holding company, with an option to buy a further 23%, giving the Respondent control of the company and the Club. CAS brought oppression proceedings claiming that the agreement with the Respondent was unfairly prejudicial to them. The holding company was joined to the proceedings as a nominal respondent.
16. CAS sought specific disclosure of a number of documents in respect of which the respondents claimed legal professional privilege. These documents fell into four classes: firstly, documents containing privileged information; secondly, advice from counsel referred to in minutes and a fax of the company; thirdly, a draft of a circular to shareholders and fourthly, documents recording legal advice. All of the documents came into existence at about the time of or in connection with the decision of the Board to support the sales of shares to the new investor. The Respondents objected to discovery claiming that it was clear at the time the advice was taken the directors realised that to proceed with the transaction would in all probability result in litigation of the type which subsequently emerged. At para. 11 of the decision the rule entitling shareholders to obtain the production of privileged documents of a company in which they hold shares was explained by reference to the decision in Woodhouse & Co. ( Ltd.) v. Woodhouse [1914] 30 TLR 559:-
“(The judge) had read the opinions, and they were taken on behalf of the company and not on behalf of others, two of them after the action begun, and the third in preparation for the action. They had to consider the principle applicable where a shareholder was a plaintiff or a defendant in litigation with the company. To his mind, whether he was plaintiff or defendant was immaterial … the principle was that if people had a common interest in property, an opinion having regard to that property, paid for out of the common fund, i.e. company’s money or trust fund, was the common property of the shareholder cestuis que trust. But where the parties were sundered by litigation such an opinion obtained by one of them was privileged.”[Emphasis added].
At para. 12 onwards the Court went on to apply this principle in the context of oppression proceedings:-
“12. In proceedings under section 4, 5, 9 of the Companies Act 1985 the company of which the disputing shareholder’s or directors hold shares and over the control of which their dispute arises is only a nominal party to the litigation which, in substance, is a dispute between shareholders. See re Crossmore Electrical and Civil Engineering Ltd. 1989 5 BCC p.73 per Hoffmann J. The same is true where a company is made defendant to a representative shareholders action against directors under the rule in Foss v. Harbottle.
13. In W. Dennis and Sons v. West Norfolk Farmers Ltd. [1943] 1 CH. page 22 Simonds J. was considering an action by shareholders seeking relief against the directors of a company who, they alleged, had improperly exercised their powers to control the company’s affairs. In those proceedings the plaintiff sought disclosure of a report by accountants which had been obtained by the company in anticipation of the dispute. In his judgment Simonds J. says this at page 222:-
“Two points have been raised, first whether, having regard to the circumstances in which, and the date on which, the accountants report was made, it is a privileged document, and, secondly, whether, even it were otherwise a privileged document, it is privileged having regard to the fact that the plaintiff are themselves shareholders in the Defendant company.
I have formed a clear opinion on the second point which disposes of the case. The general rule, which applies equally as between a company and its shareholders and thus between a trustee and its beneficiaries is thus stated at pages 518 and 519 of the Annual Practice 1943 … “a cestuis que trust … is entitled to see cases and opinions submitted and taken by the trustee for the purpose of the administration of the trust; but where stated and taken by the trustees not for that purpose but for the purpose of their own defence and litigation against themselves by the cestuis que trust they are protected … on the same principle a rate payer would be entitled to seek cases and opinions taken by the corporation on the subject of rates … and so in Gourand v. Eddison and Gower Bell Telephone Co. Ltd. an action by shareholders against the company, the plaintiffs were held entitled to seek communications between the company and their solicitors … but similarly a shareholder could not seek counsels opinion taken by the company in respect of the matter in dispute between them.”
In the present case it seems clear that when in January 1938 the defendants instructed the accountants to make a report on the interpretation of the article, and, therefore on the duty of the director’s in administrating the affairs of the company, they were doing something on behalf of all the shareholders. They were seeking to do no more than to perform their duty having regard to the difference of opinion which had arisen on the board, and they did not seek the report because some action was threatened against them. That being so, the plaintiffs, as shareholders, are entitled to see what the accountant reported regarding the rights and duties of the board.
That was the position when the report was commanded. Two days before it was made the plaintiffs instituted proceedings by way of originating summons so that the construction of the article and their rights under it might be determined. The present defendants were necessarily made defendants in those proceedings. It seems to me that the plaintiffs, by instituting the proceedings two days before the report was received, did not lose their right as shareholders to see that which they would otherwise have been entitled to. In other words the report was not a document obtained by the defendants for the purpose of defending themselves against hostile litigation, and it was only where a document is obtained by a company for that purpose that privilege can be claimed. It must never be forgotten that the rules as to privilege are strict, and, as has so often been said, privilege is not to be extended.”
14. The cases of Woodhouse and Co. and Dennis & Sons were cited by Harman J. in Re: Hydrosan Ltd. [1991] BCLC 418 together with other authority including the decision of Hoffmann J. in the Crossmore Electrical case. Harman J. was considering a S.459 petition where the petitioners were complaining that the company’s funds had been improperly applied in financing earlier litigation. The petitioners were seeking disclosure of documents relating to a rights issue of which complaint was made. Production of those documents was refused by the registrar on the grounds that they were covered by legal professional privilege.
15. Harman J., applying the rule in Woodhouse and Co. ordered that the documents be produced. The petition in that case included a prayer for the winding up of the company. It was argued that this made the litigation hostile to the company as well as to the respondent shareholders. Harman J. says (at page 421):
“It is quite true that if a winding up order is made on a contributories’ petition the company will suffer what I usually refer to as debt, that is, its coming to an end and eventual disillusion, but the wrongs claimed and the nature of the allegations are of wrongs by those in control of the company against the shareholder rather than by the company itself in any real sense. Herein this present case if there were documents created in the course of proceedings, other than the S.459 petition, such as, it may well be, the claim brought by the petitioner here against the company in the Chancery Division for wrongful dismissal and also the claim in Industrial Tribunal for what is nowadays called unfair dismissal, in such matters, it seems to me, the claim truly is against the company. A judgment recovered on it would make the claimant in it a creditor of the company and would found a creditors’ petition for winding up of the company. Such matters, it seems to me, are hostile litigation within the doctrine of Woodhouse and Co. (Ltd.) v. Woodhouse … which is an exception to the general rule, but that exception does not in my judgment have any application to documents for any members’ just and equitable petition. In such cases the principle applies which Vinelott J. asserted in Re: Kenyon Swansea Ltd. [1987] BCLC 514 at 521) …”
…
19. It follows, in my judgment, that documents in the four classifications which I set out, and which are the subject matter of this part of the application, were not documents which were protected from disclosure by legal professional privilege. They were documents which were created or which were added to by lawyers or others for the purpose of procuring the company to take certain actions, albeit it was anticipated that those actions might give rise to litigation in which a challenge would be mounted to their propriety by the present petitioner. In the present case a company has procured the issue of a substantial number of the shares of its subsidiary to Mr Doughty and giving him an option to acquire further shares which would render the company a minority shareholder in that subsidiary. It is alleged amongst other matters that the issue of those shares in the granting of the option were at a discount on the true value of the shares at the relevant time is demonstrated by their market price. It is also alleged that the shareholders of the company in general meeting were induced to vote in favour of this transaction as a result of a misleading circular. I say nothing as to whether any of these allegations are justified. I can see powerful contrary arguments. However, I can see no reason why the objecting shareholders should not be entitled to see the advice and guidance being given to the company’s board at the time these transactions were embarked upon in proceedings in which the company itself only appears as a defendant in a nominal capacity so as to be bound by any order which the Court makes.”
17. Counsel for the plaintiff contends that the present case is comparable. In both cases the justification for the disputed actions was the urgent requirement for new investment and the effect of the new investment meant that control of the company’s went to the new investor. Section 205 of the Companies Act 1963 - now replaced by s. 212 of the Companies Act 2014 - are the equivalent of s. 459 of the Companies Act 1985 in the UK. It is argued that the present proceedings would ordinarily have been brought under s. 205/s. 212 had the plaintiff remained a shareholder in the company - and that the only reason it didn’t remain as a shareholder was the invocation of Drag Along provision. Accordingly, the plaintiff had to bring its challenge through plenary proceedings, to which the company was joined for the purpose of being bound by the order of the court. It was argued that the plaintiff’s real dispute is with the second to fourth named defendants as shareholders and directors, and the fifth named defendant as the investor and now 100% shareholder in the company. Accordingly, it was contended that the plaintiff is entitled to the advice and guidance received by the company in relation to the conversion of the Loan Note and the invocation of the Drag Along provision, upon the basis that this advice was obtained by the company for the purpose of procuring the company to take certain actions, albeit that it was anticipated that those actions might give rise to litigation.
18. In their reply submissions counsel for the first named defendant argues that CAS has not been adopted in this jurisdiction. It was asserted that the case relates to a concept in English law where an insertion of privilege may be successfully challenged in circumstances where the parties have a joint interest in the document in question. Reliance was placed on a passage from Privilege authored by Colm Passmore, EXP Publishing (2nd Edition) where at para. 6.009 where the author states:-
“Similar consequences follow where a third party can establish a common or joint interest in the subject matter of a privileged communication which has been made in the course of a client-lawyer relationship to which he is not party. If a joint interest can be established, then the third party will have a right of access in litigation with the joint interest holder to his privileged communications with his lawyer, as well as to the right to assert privilege over such communications, as against others, once he has obtained access to them.”
19. Counsel argued that in cases such as CAS the parties in question had a shared or joint interest in the subject matter of the legal advice at the time the advice was sought. This it is said was not the position in the present case from the time the relationship deteriorated in February, 2014.
20. An argument was also made by counsel for the first named defendant based on the source of the funding for the legal advice over which privilege is claimed. However as there is no evidence before me as to the source of such funding I refrain from taking that argument into account.
21. It was further submitted that this was a case in which the parties were “sundered by litigation” by the time the disputed communications came into being, and that the plaintiff could not have had any interest or joint interest in the communications at least from 12th May, 2014 onwards. It was asserted that the disputed documents were not created “on behalf of all shareholders”, the phrase adopted by the court in W Dennis & Sons.
22. An argument was also mounted that the plaintiff could not claim to have an entitlement to disclosure as a shareholder because it was never registered as a shareholder of the company. While I accept that the company pleads that the plaintiff was never registered or properly registered as a shareholder of the company, this is a mixed matter of fact and law that is very much disputed and which it is not for the court to pre-determine at this preliminary stage. In my view the court should take the plaintiff’s case at its height in determining the privilege issue, and should therefore assume that the plaintiff will succeed in showing that it was at all material times a shareholder of the company for the purpose of examining and determining the issue.
23. Finally, in so far as any of the documents in question touch on any possible settlement negotiations between the parties, counsel for the company relied on the following passage from Re: Murray Consultants: Horgan v. Murray (O’Sullivan J., unreported High Court, 9 October, 1988):-
“Secondly, an issue has arisen concerning a seven page private memorandum prepared by the petitioner in the context of settlement negotiations and for the purpose of furnishing it to the respondents. Before he could hand it over, however, relations between the parties deteriorated drastically and the petitioner decided not to hand over this document. The respondents made claim that the dominant intention under which this document came into being was for the purpose of being handed over to the respondents and therefore they say it is not privileged.
I disagree. In the context of the ‘to and fro conflicting elements’ of negotiation, a document or memorandum may well be drafted by one of the parties who at the time of drafting intends it to be handed over to the other but who subsequently changes his or her mind. I think it is unrealistic to require the production of such a document if the negotiations “go sour” because I still think that this document came into being for the purposes of litigation, albeit for the specific purpose of being presented to the other side as part of an effort to avoid litigation by comprise. I think that the petition is entitled to claim privilege over this seven page memorandum.”
Discussion and Determination
24. The reason for legal professional privilege is to protect the confidential relationship that exists, and should exist, between a client and their legal advisor. As Lord Taylor C.J. stated in R v. Derby Magistrates Court, ex parte B [1995] W.L.R. 681 at p. 649:-
“The principle which runs through all these cases, and the many other cases which were cited, is that a man must be able to consult his lawyer in confidence, since otherwise he might hold back half the truth. The client must be sure that what he tells his lawyer in confidence will never be revealed without his consent. Legal professional privilege is thus much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rest.”
25. It is also well established that, unless it is waived, legal professional privilege is absolute and the court has no discretion to displace it (see Fyffes plc. v. DCC plc. [2005] 1 IR 59). The court should therefore be careful in its approach to claims of legal professional privilege to ensure that it doesn’t undermine the well established principle that communications between lawyer and client that are intended to contain or relate to confidential legal advice are protected from disclosure.
26. I accept the point that the plaintiff, because the effect of the actions of the company, if valid, was to terminate its status as a shareholder, was obliged to bring these proceedings by way of plenary summons, and might not have been entitled to bring oppression proceedings. I also accept that the reliefs sought consisting as they do largely of declarations are designed to reverse the legal effects of the purported Loan Note conversion and exercise of the “Drag Along Option”.
27. However, the relief sought at H claims:-
“Damages for conspiracy, breach of contract, breach of duty (including breach of fiduciary duty) and for intentional interference with the plaintiffs contractual relation.”
This relief is claimed against all of the defendants. Accordingly, one of the claims mounted is for damages as against the company. It cannot therefore be said that the plaintiff’s allegations are entirely limited to wrongs by those in control of the company at the relevant time, rather than the company itself - unlike the situation under consideration by Harman J. in Re: Hydrosan Ltd. In this case the first named defendant is more than a nominal defendant.
28. Leaving that objection to one side, it seems to me that legal advice obtained by a company for the purpose of procuring that company to take certain actions - even if it is anticipated that those actions might give rise to litigation - is advice which in principle a shareholder who claims that such actions are unlawful as constituting oppression should be entitled to discover. The reason for this that is most logical seems to be best articulated in the passage quoted above from Privilege by reference to “joint interest” - such a shareholder has a joint interest with the company, the directors and management, in obtaining such legal advice. Whether, following receipt of that advice, the company decides to take those actions, or decides against taking such actions, and whether or not it follows the advice given, may or may not ultimately be that relevant, but in principle the shareholder or director should be entitled to see that advice when the “certain actions” of the company become the subject matter of “oppression” or comparable litigation.
29. It follows from this that legal advice to a company that cannot be said to have been sought in the “joint interest” of shareholders may still attract legal professional privilege.
30. It also follows that generally legal advice sought after the company has taken the “certain actions that are in dispute”, at a point in time when proceedings are in contemplation, is less likely to be of joint interest and more likely to be sought for benefit of one side to the dispute. If the reality is that the legal advice is sought at that point in time for the purpose of anticipated litigation, and the dominant purpose is the pursuit or possible defence of such litigation, or the legal advice arises in the context of discussion or negotiation to compromise or avoid the occurrence of litigation, the legal advice will attract legal professional privilege.
31. So, for example, legal, valuation or accounting advice sought and given to the company in advance of the alleged decision or agreement to convert the Loan Note, even if given in anticipation of litigation arising if a particular decision is taken or agreement is reached by the company, would be discoverable because any shareholder who later claims to be aggrieved maybe said to have had an interest - jointly with other shareholders, directors and company management - in the seeking and obtaining of that advice.
32. On the other hand, in the present case soon after the contested agreement is alleged to have been reached - at meetings in late December, 2013 - battle lines were drawn and litigation became probable. From early in 2014 the legal advice sought and obtained by the company, or other likely parties to the litigation, attracts legal professional privilege. In my view this applies even if the legal steps required to formally implement the contested agreement are taken at a later date - as appears to have happened here because the Loan Note conversion and Drag Along transfer of shares were not completed or formalised until August/September of 2014. In my view the hostilities that led directly and ineluctably to the litigation are already evident in February, 2014. To adopt the wording used in Woodhouse, “But where the parties were sundered by litigation such an opinion obtained by one of them was privileged”.
33. In reaching this conclusion I am mindful of the consistent judicial policy that there needs to be confidence in the application of legal professional privilege to lawyers/client advice. As Lord Nicholls warned in Re Derby Magistrates Court at p. 700:-
“If the boundary of the new incursion into the hither privileged area is not principled and clear, that confidence cannot exist”.
34. This approach also finds support from the passage of the judgment of Finlay C.J. in Smurfit Paribas Bank Ltd. v. AAB Export Finance Ltd. [1990] 1 I.R. 469, at p. 478:-
“Where a person seeks or obtains legal advice there are good reasons to believe that he necessarily enters the area of potential litigation. The necessity to obtain legal advice would in broad terms appear to envisage the possibility of a legal challenge or query as to the correctness or effectiveness of some step which a person is contemplating. Whether such query or challenge develops or not, it is clear that a person is then entering the area of possible litigation. Having regard to those considerations I accept that where it is established that a communication was made between a person and his lawyer acting for him as a lawyer for the purpose of obtaining from such lawyer legal advice, whether at the initiation of the client or the lawyer, that communication made on such an occasion should in general be privileged or exempt from disclosure, except with the consent of the client.”
I believe these authorities justify a cautious approach to any extension or erosion of the established circumstances in which legal profession privilege maybe claimed.
Determination on the Disputed Documents Handed in to Court
35. Before applying these principles to the documents in dispute that have been handed in to court two other matters should be mentioned. First, it is not disputed that Mr. Kevin McPartlan was at all material times the General Manager of the company and that he swore his affidavit of discovery on behalf of the company. However, it is apparent from the documents that not all of his communications with Mr. Brian O’Callaghan solicitor were communications on behalf of the company. In two instances he appears to have been a conduit between the fifth named defendant and Mr. O’Callaghan in relation to legal advice sought by the fifth named defendant, or sought by both the company and the fifth named defendant. The court has no evidence as to the contractual/client relationship between Mr. O’Callaghan and the fifth named defendant, other than to note that Mr. O’Callaghan’s firm only entered an appearance on behalf of the company in these proceedings. However, if Mr. O’Callaghan chose to give legal advice to the fifth named defendant on any matter concerned with this litigation (or in the lead up to this litigation) then it seems to me that such advice and related communications prima facie attract legal professional privilege unless it has been waived by the fifth named defendant.
36. Secondly, although I have listed earlier in this judgment in Tables A and B, the documents (certain emails) described in those tables, and as taken directly from the affidavit of discovery of Mr. McPartlan and said by counsel to be in dispute, these differ somewhat in description from the copy documents handed in to court for my consideration of the privilege issue, although there is considerable overlap. In particular, documents 1and 6 as I have numbered them (emails of 1st May, 2014 and 25th January, 2015) were not included in the documents handed in to court.
37. I propose to deal with the documents handed in to court in date order by reference to the numbers in the above Tables:-
7. Email dated 5th February, 2014 from Mr. Kevin McPartlan to Mr. Brian O’Callaghan with attached draft/proposed letter of 5th February, 2014 from Mr. Tomas Flanagan to Ms. Mireille Gehlen, director of the plaintiff. Having considered these documents I am of the view they do not seek legal advice on behalf of the company, but rather seek legal advice on behalf of the fifth named defendant, the management of the first named defendant, and/or directors - other than any nominee director of the plaintiff - of the company. Accordingly this email and draft letter are covered by legal professional privilege and do not come within the scope of the CAS or ‘joint interest’ exception.
2. Email dated 14th May, 2014 sent from Mr. Brian O’Callaghan solicitor to Mr. Kevin McPartlan attaching “letter sent to Carlo Tassara Assets Management for your information”. The attachment is a copy of the letter sent by Mr. O’Callaghan to Mr. Claude Le Monnier and also addressed to the secretary of Carlo Tassara SpA, and dated 12th May, 2014. As that letter was sent to the addressees it cannot be covered by legal professional privilege. There is no legal advice as such in the covering email of 14th March, 2014 and accordingly it also is not covered by privilege.
8. Email dated 20th May, 2014 sent by Mr. Kevin McPartlan to Mr. Brian O’Callaghan, enclosing draft letter of 19th May, 2014 of Mr. P.J. Feerick to the plaintiff. I am satisfied that this email seeks legal advice on behalf of the company. I am satisfied that at the date that this communication occurred litigation had been threatened and was imminent, and that the advice on this draft letter was sought in that context. This email and the attached draft are therefore covered by litigation privilege.
3 and 4. In fact these are three related emails:
• first a thread of emails including 1st September, 2014 at 11.14 from Mr. Brian O’Callaghan to Mr. Kevin McPartlan and response of Mr. Kevin McPartlan on 1st September, 2014 at 11.55;
• second an email of Mr. Kevin McPartlan to Mr. Brian O’Callaghan 1st September, 2014 at 11.53 with attached proposed letter of Mr. P.J. Feerick 1st September, 2014 to the plaintiff; and
• thirdly email response from Mr. Brian O’Callaghan of 2nd September, 2014 at 17.23.
I am satisfied that this email exchange and the attachments are covered by litigation privilege.
5. Email thread with last email dated 22nd January, 2015 Mr. Kevin McPartlan to Mr. Thomas Flanagan in response to email dated 21st January, 2015 from Mr. Tomas Flanagan to Mr. Kevin McPartlan containing draft letter which the author proposed to send to Mr. Brian O’Callaghan. I am satisfied that the email of 21st January, 2015 was sent in confidence by the fifth named defendant to Mr. Kevin McPartlan, and with the dominant intention of seeking legal advice for the benefit of the company and for the benefit of the fifth named defendant. This thread therefore relates to communications between the company and the defendant of a confidential nature and related to possible negotiation of settlement of the litigation which was then in being, and with a view to obtaining legal advice from Mr. O’Callaghan. I am satisfied that this is protected by privilege of the sort held to apply in Horgan v. Murray by O’Sullivan J. in the context of possible settlement negotiations.
Email dated 26th January, 2015 from Mr. Brian O’Callaghan to Mr. Kevin McPartlan, with attached Statement of Claim. This email and attachment were not highlighted by counsel by reference to the Second Part of Mr. McPartlan’s affidavit of discovery as documents over which privilege was sought, but may refer to one of three emails of the same date between the same individuals that are listed under Category A.1 in the listed documents over which privilege was claimed.
This email is clearly covered by litigation privilege, but the attached Statement of Claim is not.
38. Accordingly, in relation to the disputed documents handed into court I direct that:-
(a) Document No.2 in Table A is not privileged.
(b) The Statement of Claim attached to the email dated 26th January, 2015 from Mr. Brian O’Callaghan to Mr. Kevin McPartlan is not privileged, but the email is privileged.
(c) All the other documents handed into court for consideration are privileged.
39. I am returning the disputed copy documents handed into court to the first defendant’s solicitors.
